DNYA EKONOMISINDE CANLANMA BEKLENTILERI VARDIR.

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TURKEY TOWARDS SUSTAINABLE GROWTH
AND PROFITABLE OPPORTUNITIES
NOVEMBER, 2005 Chairman, TAIK (Turkish-US
Business Council) Dr. Yilmaz ARGÜDEN www.turkey-n
ow.org
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POLITICAL OUTLOOK AND CHANGING MENTALITIES
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25 YEARS OF INTEGRATION WITH THE WORLD, 42 WITH
THE EU
Accession Negotiations Decision
Free Circulation of Capital
Customs Union
2005 and beyond
1996
1989
CLOSED ECONOMY
1980
1995
2002
WTO
Free Market Economy
Full Membership Perspective
Political Immobilism Structural
Problems Striving Private Sector
Changing Political and Business Habits Towards
a New Understanding
IRREVOCABLE PROCESS
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CHANGING MENTALITY IN TURKISH POLITICS
New Single Party Government In Office Since
2002 Culturally Conservative Yet Open-Minded And
Business Oriented

• Committed To And Successful In
• Fiscal Monetary Discipline
• Structural Reforms
• Implementing International Standards
• Integration With EU

OLD HABITS DIE HARD BUT THEY DO EVENTUALLY
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CHANGING ATTITUDE OF PRIVATE SECTOR
Producing Export Oriented Goods And Services At
Affordable Prices (billion ) 1980 1990 2000 2003
2004 2005 CAGR 2000-05 Exports
3 13 28 47 63 72
21 Imports 8 22 55 69 98 115
16 Exports (billions ) CAGR
2000 2003 2004 2000-04 Textiles
10,1 15,1 17,6 15 Vehicles 2,4
6,2 9,5 41 Machinery 3,4
8,5 8,9 27 Metals 2,9
5,3 8,8 32
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CHANGING ATTITUDE OF PRIVATE SECTOR
Focus on Quality Turkey Wins Most Quality
Awards in Europe. By 2004, Turkey Was Awarded
Largest Number of Quality Awards
BRISA BRIDGESTONE/S
ABANCI TYRES BEKO KOÇ GROUP CONSUMER
DURABLES BOSCH BSH AUTOMOTIVE
SUPPLIES BEKSA SABANCI GROUP STEEL
CORDS VITRA ECZACIBASI CONSTRUCTION ARCELIK KOÇ
GROUP CONSUMER DURABLES NETAS NETAS TELECOM
S ERDEMIR OYAK IRON/STEEL ECA ELGINKAN
GROUP HEATING ELEMENTS SKF SKF ROLLINGS
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CHANGING ATTITUDE OF PRIVATE SECTOR

• Creating World Brands Of Her Own
• Brand Industry Mostly Active In Origin
• Beko Electronics USA and Europe Turkey
• Mavi Textiles USA and Europe Turkey
• Efes Beverages Europe, Asia Turkey
• As Well As Manufacturing For World Giants
• Companies Industry
• Renault, Ford, Fiat, Toyota, Pirelli, Goodyear
  Automotive
• Mercedes, Hyundai
• Bosch, Siemens, Vaillant Consumer Dur.
• Coca-Cola, Unilever, PG FMCG

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ECONOMIC OUTLOOK
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OVERVIEW OF THE TURKISH MARKET (2004)

• POPULATION (Million) 72
• LABOUR FORCE (Million) 22
• GNP ( Billion) 302
• PPP 562
• GNP/CAPITA () 4,200
• PPP 7,800
• HOUSEHOLD INCOME () 18,900
• PPP 35,100
• NUMBER OF HOUSEHOLDS(Million) 16

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TURKISH ECONOMY HAS MAINTAINED A WELL ABOVE
AVERAGE GROWTH RATE AND HAS BEEN EXPERIENCING
FOURTH SUCCESSIVE YEAR OF GROWTH
Last Decade 2002
2003 2004 2005 CAGR
YoY YoY YoY
Est. GNP 3 8 6
10 5 EXPORTS 8 23
20 33 25 IMPORTS 9 12
20 40 28

ANNUAL GROWTH RATE GOES UP TO 7 WHEN CRISES
IN 1994, 1999 AND 2001 ARE EXCLUDED
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A HISTORICAL OPPORTUNITY FOR SUSTAINABLE GROWTH

• TURKISH ECONOMY SEEMS TO HAVE SET ON THE RIGHT
  TRACK
• FOR SUSTAINABLE GROWTH
• ECONOMIC MANAGEMENT IN LINE WITH TARGETS
• IMF PROGRAMME IS STRICTLY FOLLOWED
• BUDGETARY TARGETS ARE REASONABLE
• SIGNIFICANT DECREASE IN REAL AND NOMINAL
  INTEREST RATES
• SIGNIFICANT DECREASE IN INFLATION
• FOURTH SUCCESSIVE YEAR OF GROWTH IS EXPECTED IN
  2005
• FOREIGN TRADE IS GROWING SIGNIFICANTLY
• LOWERING EXPECTATIONS IN EXCHANGE RATES RISK
• THERE IS STILL PLENTY TO ACCOMPLISH AND MANAGE
• STRUCTURAL REFORMS NEED COMPLETION
• PUBLIC MONETARY DISCIPLINE NEEDS TO BE FOLLOWED
  VIGOROUSLY
• CURRENT ACCOUNT DEFICIT NEEDS TO BE KEPT UNDER
  CONTROL

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EU IS A STRONG ANCHOR FOR FUTURE DEVELOPMENTS
HISTORICAL
TURKEY
EU

• Formal Relationship
• Since 1963

Creating An Economic Financial Union
Efforts Of Integration With World Economy
COMMERCIAL

• Main Trading Partner
• Customs Union

Creating A Single Currency
Recognition Of The Potential In Turkey
-Inclusion of Turkey in G-20
ECONOMIC

• CU Related Legislation
• Free Market Economy

Enlargement
POLITICAL
FULL MEMBERSHIP CANDIDACY
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TURKEY AS AN INCREASINGLY COMPETITIVE WORLD
PLAYER DRIVING FORCES BEHIND SUSTAINABLE GROWTH
POTENTIAL DYNAMISM
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TURKEY AS A BUSINESS HUB
E.U.
ASIA
MOSCOW
BERLIN
2,000 km
1,700 km
BAKU
PARIS
TASHKENT
1.800 km
2,000 km
ISTANBUL
3,400 km
ROME
1,400 km
TEHRAN
TEL AVIV
2,000 km
1,100 km
MIDDLE EAST
AFRICA

• PERFECT LOCATION OF ISTANBUL FOR
• REGIONAL HEADQUARTERS OF
• INTERNATIONAL COMPANIES SUCH AS
• COCA-COLA
• MICROSOFT
• JP MORGAN CHASE
• GENERAL ELECTRIC

• DEVELOPED COUNTRY LEVEL
• INFRASTRUCTURE FOR BUSINESS AND LIVING
• STATE OF THE ART TELECOM FACILITIES
• AVAILABILITY OF EFFECTIVE LOGISTICS SYSTEMS
• SKILLED LABOUR
• DEVELOPED FINANCIAL MARKETS
• STATE OF THE ART HEALTH SERVICE
• EDUCATION SUITABLE TO ALL NEEDS

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TURKEY OFFERS A SOUND LEGAL BASIS FOR
INTERNATIONAL INVESTORS

• FREE MOVEMENT OF CAPITAL SINCE 1990
• WELL-SECURED ENVIRONMENT FOR FOREIGN CAPITAL
• HIGHLY LIBERAL AND NON-DISCRIMINATORY FOREIGN
• INVESTMENT LEGISLATION
• INTERNATIONAL ARBITRATION MECHANISM
• COMMERCIAL LEGISLATION IN LINE WITH THAT OF THE
• DEVELOPED WORLD
• COMPETITION LEGISLATION
• PROTECTION OF PROPERTY RIGHTS
• INVESTMENT INCENTIVES
• NEW DIRECT INVESTMENT LAW EFFECTIVE SINCE JUNE
  17, 2003
• COMPANY ESTABLISHMENT PROCEDURES SIMPLIFIED

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MAIN DRIVING FORCES BEHIND TURKEYS DYNAMISM

• UNSATURATED LOCAL MARKET AND YOUNG POPULATION
• 30 BELOW 15 YRS OF AGE (DECREASING)
• DYNAMISM IN THE DOMESTIC MARKET DUE TO INCREASED
  
• COMPETITION
• CHANGES IN LIFE STYLES AND CONSUMPTION PATTERNS
• AVERAGE HOUSEHOLD SIZE 4.4 (DECREASING)
• 74 URBAN POPULATION (INCREASING)
• POSITIVE EXPECTATIONS RESULTING FROM THE
  INITIATION
• OF ACCESSION NEGOTIATIONS WITH THE EU
• DYNAMIC AND GROWING PRIVATE SECTOR

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KEY GROWTH SECTOR ENERGY

• TURKEYS ENERGY SUPPLY IS EXPECTED TO DOUBLE TO
  REACH
• 155 mtoe IN 2010
• NEED OF FURTHER ENERGY INVESTMENTS AMOUNTING TO
  
• 20-25 BILLION USD TO MEET THE GROWING
  DOMESTIC DEMAND
• TURKEY IS A PROMISING CANDIDATE FOR BEING THE
  ENERGY
• TERMINAL OF THE REGION IN THE 21ST CENTURY
  THANKS TO
• EURASIAN ENERGY RESOURCES

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KEY GROWTH SECTOR ENERGY

• CASE OF ELECTRICITY
• 8 AVERAGE INCREASE IN ANNUAL ELECTRICITY
  DEMAND
• 24.000 MW OF INSTALLED CAPACITY IN 2000 MUST
• INCREASE TO 65.000 MW IN 2010
• 4.000 MW ADDITIONAL CAPACITY NEEDED PER ANNUM
  IN
• 10 YEARS
• INVESTMENT OPPORTUNITIES BY WAY OF BOT, BOO
  AND
• CO-PRODUCTION MODELS
• EXAMPLE INTERGEN-ENKA-BECHTEL JV TO BOO 3
  POWER
• PLANTS TOTALING 3.854 MW , WORTH 2.2 BN

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RAPIDLY DEVELOPING SECTOR TELECOMMUNICATIONS

• PRIVATISATION OF TURK TELEKOM WAS REALISED
• A RAPIDLY DEVELOPING SECTOR
• 1994 2003
• NUMBER OF MOBILE
• PHONE SUBSCRIBERS 80.000
  27.000.000
• LIBERALIZATION OF FIXED TELEPHONY SERVICES
  THROUGH ABOLITION OF
• MONOPOLY OF TURK TELEKOM IN 2004
• THIRD GSM LICENCE SOLD DURING 2000 BECAME
  OPERATIVE IN
• 2001. TURK TELEKOMS GSM OPERATOR ALSO
  LAUNCHED IN 2002
• NOW BOTH NEW GSM OPERATORS MERGE UNDER ONE ROOF
  
• INVESTMENTS BY WORLD TELECOMMUNICATION GIANTS
  SUCH AS
• NOKIA, ERICSSON AND SIEMENS IN TURKEY
• 4 MILLION INTERNET USERS (EST.)

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HIGH POTENTIAL TOURISM
Turkey is the 13th country attracting the highest
number of tourists and in terms of revenues,
Turkey ranks 8th according to WTO as of 2004. WTO
expects 25 million tourists visiting Turkey
annually by 2010
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AN AREA OF FOCUS IN TURKEY THE SOUTH EASTERN
ANATOLIAN PROJECT
A 30 BILLION INVESTMENT

• AIMS TO DEVELOP ALL THE LAND AND WATER
  RESOURCES IN
• THE REGION
• COVERS 10 OF TURKEYS SURFACE AREA
• COVERS 20 OF TURKEYS LAND SUITABLE FOR
  IRRIGATION
• 8.5 MILLION HECTARES
• AGRICULTURAL PRODUCTION IN THE REGION WILL BE
  INCREASED
• BY SIXFOLD
• WILL SUPPLY 25 OF ELECTRICITY AND 85 OF
  HYDROELECTRICAL
• ENERGY OF TURKEY

• AGRIBUSINESS OPPORTUNITIES
• CAPABLE OF GROWING MOST TEMPERATE AND
• SUBTROPICAL CROP SPECIES
• JOINT VENTURE OPPORTUNITIES

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STRONG RELATIONS WITH TURKIC REPUBLICS

• TURKEY HAS THE LARGEST NUMBER OF INVESTORS IN
• TURKIC REPUBLICS AND SECOND LARGEST IN
  TERMS
• COMPANIES OPERATING ESPECIALLY IN
• AUTOMOTIVE SECTOR
• WHITE GOODS
• RETAILING
• CONTRACTING
• INFLUENCE OF TURKEY IN THE REGION IN MATTERS
  RELATING TO
• EDUCATION - STUDENT EXCHANGE PROGRAMS
• WIDESPREAD TURKISH TV BROADCAST eg CNN TÜRK
• TELECOM FACILITIES ACTING AS A HUB
• FOREIGN AFFAIRS
• LARGEST NO OF FLIGHT DESTINATIONS

• EASY ACCESS TO TURKIC REPUBLICS THANKS TO
• CULTURAL LINGUISTIC LINKS
• POSSIBILITY OF ADDRESSING SOME 300 MILLION
  PEOPLE

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RECENT PRIVATISATION, MA AND PRIVATE
EQUITY ACTIVITIES
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PRIVATIZATION
162 COMPANIES HAVE BEEN PRIVATIZED FROM 1986
UNTIL 2004, GENERATING A REVENUE OF 9
BILLION. 2005 WITNESSED PRIVATISATION OF
UNPRECEDENTED SCALE
PRIVATISED INDUSTRY SHARE ACQUIRED VALUE SOLD
BY PAID () (billion USD)
TURK TELEKOM Telecom 55 SAUDI OGER 6,55 TÜPRAS
Energy 51 KOÇ/SHELL 4.14 ERDEMIR Steel 46 OYA
K(TR) 2.77
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TO BE PRIVATIZED OR SOLD OUT BY GOVERNMENT
AUCTIONS

• PRIVATISATION AND GOVERNMENT SELL OUTS WILL CARRY
  ON AT FULL SPEED WITH THE SALE OF
• ELECTRICITY DISTRIBUTION COMPANIES
• POWER PLANTS
• TELECOMS (2nd GENERATION GSM)
• AGRIBUSINESS (MAINLY SUGAR)
• MOTORWAYS (RIGHTS OF USE)
• INSURANCE
• PORTS (RAILWAY CONNECTED)
• REAL ESTATE (GENERAL AND TOURISTIC NATURE)
• TRANSPORT (AIRLINES)

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FINANCIAL SECTOR
Recent Mergers in Financial Sector

• TEB BNP Paribas France
• DISBANK Fortis Netherlands
• Belgium
• YAPI KREDI UniCredito/Koç Italy
• GARANTIBANK GE Capital USA
• SEKERBANK Rabobank Netherlands
• GLOBAL SECURITIES Banca IMI Italy

Financial sector has already attracted great
attention of foreign investors.
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OTHER EXAMPLES OF PRIVATE EQUITY ACTIVITY
THROUGH MAs AND GOVERNMENT SELL OUTS
Country Investor Acquiring Year Industry Value
Million USD
USA AIG Galatasaray 2000-3 Entertainment
15 Egypt EMEA Probil 2002 IT Dutch FMO TUYA
P 2000 Exhibition Germany DGE Goldas 2002 J
ewellery 6 UK Tesco Kipa 2003 Retail 124
France Carrefour Gima Endi 2004 Retail
133 Turkey Migros Tansas 2005 Retail 387
Canada Canwest Radio Channels 2005 Communicatio
ns 56 Turkey Dogan TV Channel 2005 Communica
tions 306 Turkey, Italy Various 9 Cement
2005 Construction 1.073 Belgium Factories
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POTENTIAL AREAS OF INVESTMENT A SUMMARY
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SECTORS LIKELY TO BENEFIT FROM CURRENT ECONOMIC
CLIMATE

• ENERGY
• GROWTH POTENTIAL
• INCREASED ECONOMIC ACTIVITY
• CONSTRUCTION AND REAL ESTATE
• SIGNIFICANT GROWTH POTENTIAL
• RETAILING
• CHANGING LIFE STYLES
• AGRIBUSINESS
• ENJOY SUSTAINED DEMAND, HIGH LIQUIDITY
• LONG FX POSITION
• CONSUMER ELECTRONICS
• HAVE HIGH EXPORT SALES
• STRUCTURAL STEEL

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MAIN AREAS OF GENERAL OPPORTUNITY

• MANUFACTURING
• PRIVATIZATION
• DELOCALIZATION
• STRATEGIC ALLIANCES
• SOURCING BASE
• INFRASTRUCTURE
• PRIVATIZATION
• ENERGY
• TELECOM
• ENVIRONMENTAL PROTECTION
• IRRIGATION
• TRANSPORTATION

• SERVICES
• PRIVATIZATION
• BANKING
• TOURISM

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SEEING IS BELIEVING
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DID YOU KNOW THAT
...The only city in the world located on two
continents is Istanbul, which was the capital of
three great empires, Roman, Byzantine and Ottoman
for more than 2000 years. ...There are at least
150 archaeological excavations taking place in
Turkey each year. ...The world's
oldest known human settlement is in
Catalhoyuk, Turkey (7500
BC). ...Two of the seven ancient wonders of
the world, the Temple of Artemis and the
Mausoleum at Halicarnassus, are located in
Turkey. ...Anatolia is the birthplace of
historic legends, such as Omer (the poet), King 
Midas, Herodotus (the father of history) and St.
Paul the Apostle.
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DID YOU KNOW THAT
...Julius Ceasar proclaimed his celebrated
words, "Veni, Vidi, Vici" (I came,  I  saw, I
conquered) in Turkey when he defeated the Pontus,
a formidable kingdom in the Black Sea region of
Turkey. ...Turks introduced coffee to Europe
and the tulip to the Dutch. ...St. Nicholas, who
became popular as Santa Claus, was born in Demre
(Myra) on Turkey's Mediterranean
Coast. ...According to legend, Noah's Ark landed
on Agri Dagi (Mount Ararat) in  Eastern Turkey,
the supposed remains of which can be seen there
today. ...The last meal on Noah's Ark, a
pudding with nearly 20 ingredients, is still
served throughout Turkey.
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DID YOU KNOW THAT
...The last home of the Virgin Mary is located
in Selcuk, Turkey and, still intact, attracts
thousands of visitors each year. ...St. John,
St. Nicholas, St. Paul and St. Peter all lived
and preached throughout Southern
Anatolia. ...Homer was born in Izmir on the
west coast of Turkey and he depicted Troy in 
his Epic the Iliad. The Famous Trojan Wars
took place in western Turkey, which is marked
with a wooden statue of the Trojan Horse
today. ...Aesop, famous for his fables and
parables, was born in Anatolia. ...Leonardo da
Vinci drew designs for a bridge over the
Bosphorus, the strait that flows through Europe
and Asia. It was never built (although two
suspension bridges span the straight
today). ...Alexander the Great conquered a large
territory in what is now Turkey and cut the
Gordion Knot in the Phrygian capital (Gordium)
not far from Turkey's present-day capital
(Ankara).
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DID YOU KNOW THAT
...Istanbul's Robert College (established in
1863), is the oldest American university outside
the United States. ...Early Christians escaping
Roman persecution nearly 2000 years ago sheltered
in Cappadocia in Central Anatolia. ...The
Amazons are supposed to have originated in
Turkey's northeastern region. ...The first
church ever built by man (St. Peter's Church) is
located in Antioch (Antakya), in southern
Turkey.
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DID YOU KNOW THAT
...The first Ecumenical Council was held in Iznik
in Western Turkey. ...Democratic institutions of
Patara, located on the Mediterannean region of
Turkey, has been one of the sources of
inspiration for the U.S. Constitution ...Suleyman
the Magnificent (the famous Ottoman Sultan) was
a poet who wrote over 3000 poems, some of them
criticizing the greed of mankind. ...Anatolia is
the location of the first known beauty contest,
judged by Paris, with Aphrodite, Hera and Athena
as leading participants. ...Anatolia was
producing wine as early as 4000BC. ...Anatolia
is the location of the Seven Churches of
Asia. ...Anatolia is the origin of the names of
Paris, Philadelphia, and Europe.
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IN SUMMARY

• IF YOU ARE IN SEARCH OF
• NEW MARKETS FOR GROWTH
• NEW SOURCES TO INCREASE COMPETITIVENESS
• A PLACE YIELDING HIGH RETURNS
• A BRIDGE TO NEW MARKETS
• A HOLIDAY DESTINATION WHERE PAST, PRESENT AND
  FUTURE CREATE THE MOST BEAUTIFUL COLORS

TURKEY IS THE RIGHT PLACE IN THE REGION